"But there is something appealingly anti-establishment about all this; something subversive about how, largely on individual initiative, undertaken without flourish or fanfare, it is possible to sidestep the multinationals and the government and power your car in a natural, clean and efficient way. Today. All you need is a bit of cooking oil, new or second-hand, and the relevant tax return form, available to download from John Nicholson's biopower website."

When staff at a Welsh supermarket first noticed dramatic increases in the sale of cooking oil, they thought the locals were doing a lot of frying. They weren't. They were filling up their cars with it - not surprising, as it's only 42p a litre. Trouble is, if you don't pay duty, it's illegal. Jim White reports

According to Mike Hebson, the manager of Asda's store in Swansea, south Wales, there was no reason to be suspicious that sales of the company's cheapest bottles of cooking oil were running 20% higher than the previous year, way above any other store in Britain. "We just thought it was one of those things," says Hebson.

Why should he and his staff have been remotely questioning, he suggests, if men in overalls and lived-in denims had started buying Smart Price vegetable oil in batches of six, eight and 12 litres at a time. When one customer came in and filled a trolley to the brim with plastic containers of the thin, urine-coloured liquid, the checkout operator barely gave him a second glance.

"Naturally, we assumed they were buying on price," says Hebson, an Asda man to the soles of his own-brand brogues. There was another reason that his staff were unlikely to see anything untoward in bulk-buying cheap vegetable oil. "We just thought they were doing a lot of frying," he says. "You have to remember, healthy eating has not hit Swansea in a big way."

It wasn't until the Department of Transport began a series of trial tests in the city last March that staff realised something odd had been going on. In an attempt to take diesel vehicles belching out illegal emissions off the road, department inspectors introduced experimental spot checks on roads in Bristol, Westminster, Glasgow, Middlesbrough, Canterbury and Swansea. It was in the latter that they found something surprising: a car with a fuel tank half full of cooking oil.

"The funny thing was," says Hebson, "the driver told them he had been getting it from Asda Swansea for four or five months, because it was the cheapest around. When we read the report in the local paper we began to put two and two together."

The enterprising motorist was, so the reports suggested, running his diesel-engine motor on a mix of Asda cooking oil and standard fuel. At 42p a litre, the supermarket chain's oil is considerably cheaper than the 73p a litre that even a discounted retailer charges for diesel. The astonishing thing was it worked. Without any need to modify the engine, the motorist could run his car on the mix with no discernible difference in its performance. What's more, instead of diesel fumes, the engine gave off a rather pleasing odour - like frying time at the local chippy.

And if Asda's sales figures were anything to go by, unless he was running a fleet of buses across south Wales, the driver who had been pulled over by the emissions inspectors wasn't the only one. Wind your windows down in a Swansea traffic jam last spring, the rumour went, and the chances were you would think someone was having a barbecue. The local joke was that the whiff was particularly prevalent around the DVLC, the government's national car-licensing department, which is headquartered in the city. It was a nice irony, because, as the cooking-oil driver discovered when he was fined £500 and had his car impounded, the government is not amused by cheap alternative fuel. Diesel is relatively pricey because a large chunk of the cost is made up by duty. Cooking oil carries no such tax. But if it is put to use in a petrol tank, duty is due.

When, in September, just up the coast from Swansea, in Burry Port, near Llanelli, six more drivers were discovered apparently running their cars on cooking oil, the news quickly spread. "It was a media feeding frenzy," says Dai Davies of Dyfed and Powys police, whose officers were involved in the spot checks. "Everyone came down here, from the local BBC news to the New York Times." Within a couple of days, the story was in circulation of a crack team of law-enforcement officers swooping on south Wales motorists, of widespread tax fraud, of a hunt for the Mr Big of the cooking-oil scam.

One report in a Canadian paper talked of round-the-clock stakeouts in the aisles of Asda that netted a couple buying 100 litres of oil at a time. A witty subeditor coined a nickname for the operation that immediately stuck: the Frying Squad.

"There wasn't a team as such," says Davies. "It was a multi-agency approach. The police stopped the vehicles on this occasion but had no power of arrest. We were doing so on behalf of the excise. They were the ones who could levy the fines. It was a good story, but no, the Frying Squad was all a bit of a media myth really."

But environmentalist John Nicholson was not amused. The jaunty news items about nasally enhanced officers who could sniff out a tax-evading exhaust pipe at 40 paces had put his campaign to alert the country to the benefits of biofuels into rapid reverse. He was furious.

The appreciation in Wales that you could cheerfully run your diesel vehicle on cooking oil really began to take hold during the fuel-price disputes in the autumn of 2000. Fuming farmers and hauliers with the hump parked their trucks and tractors across the entrance to the oil refinery at Milford Haven, which services much of Wales.

They were protesting against levels of fuel duty that they considered unsustainable, and their blockade was so successful that, after a couple of days of panic buying, virtually every garage in the principality had run out of stocks. Nicholson, who lives in a remote part of rural mid-Wales, was typical of those affected.

"We don't have a television, so I'd been unaware that the blockade was happening," he recalls. "I went out to get some diesel and every garage had run out. My wife's a nurse and needed the car to get to work. I panicked rather."

Returning home, he looked round for alternative fuels, and tried a bit of central heating oil, which worked, he says, reasonably well. Then, remembering his schoolboy mechanics, he popped some cooking oil into his Volvo. "It mixed with the little bit of diesel I had left in the tank," says Nicholson. "Not only did it work, the vehicle actually behaved better. I never heard my car sound so good, there was a fantastic noise, not a clickety-click, more of a grunt. And then, of course, there was the smell." He used vegetable oil to tide him over until the blockade ended. But so happy was he with the performance it gave, that he decided to use it full time, and set up a website to exchange information on biopower.

He discovered that they have been doing this sort of thing in Germany for years - not simply because it is cheaper, but because of the environmentally beneficial effects of using sustainable fuels made from rape and sunflower seeds rather than fossil fuels. Over there it is a sizeable industry, supported by tax breaks; it is no coincidence that Mercedes and Volkswagen engines are the most cooking-oil tolerant on the market. Indeed Mercedes motors are so accommodating that they will, apparently, run on lard.

Within a few months, more than 300 drivers had joined Nicholson's web network. But not everyone was thrilled at the rush to bio. "For some reason, the AA put out the story that using cooking oil will either clog up or blow up your engine," he says. "Well, which is it? It can't be both. The fact of the matter is, it works brilliantly."

Not far from Llanelli, in Laugharne, home of Dylan Thomas, an engineering student called Chris Dovey joined Nicholson's biopower network last June. Since then he has been running his Ford van entirely on cooking oil. Except he doesn't buy it from Asda - he gets it used, from the canteen in Haverfordwest County Hall. He filters it, adds a drop of white spirit, and hey presto - after a little modification to the blades in his fuel pump - his van runs like a dream. "Well," he says, "the first ever diesel engine ran off peanut oil, so I'm just following tradition."

Like Nicholson, however, Dovey is doing something those Asda-buying drivers stopped in Llanelli were not. He is paying duty. "The canteen was giving me the stuff, only too glad to get rid of it, and I thought: 'I'm on to something here.' But my mum said to me, 'You get nothing for free in this world, you'd better find out the implications.' So I contacted the local customs people and they were most helpful."

An excise inspector came to visit Dovey, checked he wasn't refining enough to keep most of Laugharne in biofuel, and gave him the relevant paperwork. "I get the oil for nothing and pay 26p a litre in duty on it, which still makes it a lot cheaper than diesel at the pumps," he says, flourishing a form on to which he is obliged to list every litre of fuel he filters through the modified oil drum in his garage. "But if I went into it as a business I think the red tape would strangle me."

This, Nicholson says, is a typical experience of anyone trying to run a vehicle on cooking oil. "The government seems to be making it deliberately difficult," he says. "The most important thing to remember is, it is not illegal to run your car on cooking oil." As long as duty is paid, that is. And Nicholson reckons that, since duty is paid retrospectively, even those who were stopped in the south Wales checks were not breaking the law. "I am driving on fuel on which I have not yet paid the tax. I will do, but I don't need to until it's used. So was anyone who was stopped given the chance to pay his tax? If not, why not? To stop anybody for using this fuel is harassment."

He believes that the stories (one paper suggested more than 400 people had been pulled over for using cooking oil) have done the excise's job for it. There is no need for a Frying Squad; the rumour of its existence is enough. Indeed, Hebson's stocktaking at Asda's Swansea branch suggests that many previous cooking-oil users have been put off by the assumption that they could have their vehicle impounded at any moment: saving a few pence a litre hardly seems worth the risk of a £500 fine. Such is the fear of the mythical Frying Squad that Nicholson now prints car stickers for those in his network who want to announce their legitimacy.

"Once that first bloke had been done, I think the publicity put a lot of people off," says Hebson. "Almost from the moment the story appeared in the paper, our sales went back down to the national average."

But there is something appealingly anti-establishment about all this; something subversive about how, largely on individual initiative, undertaken without flourish or fanfare, it is possible to sidestep the multinationals and the government and power your car in a natural, clean and efficient way. Today. All you need is a bit of cooking oil, new or second-hand, and the relevant tax return form, available to download from Nicholson's biopower website.

"I suppose if I factored in the time I spend filtering the stuff, it wouldn't work out so cheap," says Dovey. "But there's a little bit of me that says it's worth it just to be getting one over on the big oil companies, really."

Meanwhile, Asda has announced that as of next year, its fleet of delivery vehicles will be converted to run on fuel made from the waste on cooking oil collected from stores across the country (they fry a million doughnuts a day nationwide, apparently). Though a spokesman was quick to point out that they didn't get the idea from their customers in south Wales. Oh, and they will be paying the duty.